NEW DELHI: Amid a global shortage of rigs that explore deep ocean waters for oil, India’s largest oil and gas exploration company is facing an 85% hike in costs of securing a suitable offshore rig.
The Oil and Natural Gas Corporation (ONGC)plans to float a tender to lease an ultra deep-water rig for three years. ONGC needs this rig to spud—the starting process for drilling on a new well—up to 3,000 metres below the sea surface. Industry analysts are of the opinion that ONGC will likely get the services of a new rig for $400,000 (Rs1.8 crore) per day.
ONGC needs to do this as its only deep-water rig is from Dolphin Drilling of the United Kingdom on a lease that will expire at the end of March 2007.
In the current rig demand-supply scenario, a deep-water rig commands a per day rental of around $300,000 while an ultra deep-water rig may command a rental of $400,000, excluding service costs.
When ONGC had contracted the present rig from Dolphin Drilling, it had paid a rig rate of $192,000 per day and around $160,000 for the services per day. Together with additional costs by way of rig services at $200,000-$250,000, the total cost for ONGC would work out to $650,000—as compared with $352,000 it had paid earlier.
There is a shortage of rigs globally. ONGC has a total of 100 rigs. Out of this 30 are offshore rigs, of which 10 are company-owned, and the rest have been leased by the oil and gas major.
ONGC will prefer an integrated service provider—a company that can supply the rig and provide the necessary rig services. “We have a problem situation right now in our hands, and the rig supply position, globally, is very tight. We expect a few interested players for this tender but we may have to pay a premium to employ this rig,” an ONGC executive said.
The companies expected to participate in the tender process are global rig majors such as Transocean Inc. of the United States, Norway’s Statoil, Smedvig ASA and Fred. Olsen Energy ASA, among others.
The ultra deep-water rig is very important for the company’s continuing exploration campaign in the Krishna Godavari basin and Mahanadi basin in the Bay of Bengal.